To do this you would select some tools to shrink the existing XP partition then leave the open space for the Windows 7 install. At no time would I ever create the partition for 7 to install to. I leave unpartitioned space for 7 to use.
Before I do any shrink I have a backup of my system. The tools I would use are CLONEZILLA and GPARTED. I don't supply step by step instructions as there are web pages on these tools and their uses.
I have an extra TB of disk space that is unused and would like to install Windows 7 on my computer without deleting the XP system I use. I want to do this as a test of how many programs will I have to re-install and do drivers exist for printers etc. Two questions: 1) how do I establish the new partition that I will need and 2) How will I boot the computer to either operating system?